Manchester Mayor Ted Gatsas, center, chats with Joseph Reilly of Centrix Bank and Cort Mendez of Five Guys Burgers and Fries at the Greater Manchester Chamber of Commerce's State of the State/State of the City breakfast. (KATHY REMILLARD PHOTO)

GOFFSTOWN - Mayor Ted Gatsas threw down the gauntlet on education funding Wednesday, telling a group of business leaders gathered at the New Hampshire Institute of Politics at Saint Anselm College that teachers need to make the same concessions other city employees have made on health insurance. If they did so, he said, the city would have another $4.4 million to invest in education.

"If we could implement the same split on health care in the school system that we have in other city departments, we could save 16 percent of the school budget," he said in his annual State of the City address before the Greater Manchester Chamber of Commerce. "That's enough to hire 80 more teachers and reduce class size."

The existing teachers contract expires in June, and negotiations are under way.

School Superintendent Thomas Brennan told the mayor and aldermen in March that Manchester faces a stark choice: Overrride the city's tax cap or pass a budget that will lead to larger class sizes and risk a mass exodus of students from sending towns.

Gatsas said he was adamant about not overriding the tax cap, although several school supporters turned out at a hearing on April 1, urging him to do so. "The discussion should not be about overriding the tax cap," he said. "It should be about doing things more efficiently."

Current health-care benefits to teachers would be considered "Cadillac plans," he said, and would be taxed aggressively under Affordable Care Act provisions that take effect in 2014.

He said teachers still enjoy plans with zero deductibles, $5 co-pays and $50 charges for emergency room visits, while the police union, among others, recently made concessions to avoid layoffs, shifting to a plan with higher co-pays, deductibles and $150 per emergency room visit.

"With the $3 million in savings, we hired more police officers," Gatsas said.

Education issues have been front and center as budget deliberations heat up and with contract negotiations under way. "There is no hotter topic in Manchester right now than education," the mayor said, suggesting there were many successes in the city's school system that are being overlooked, including the opening of the Manchester School of Technology.

Despite the controversy about class size, he said, "Manchester education is a quality education, and the teachers give 100 percent. I know there are some people who just want to say things are bad in Manchester schools, but there are things happening that are very exciting in this city."

He said the search for a new superintendent to replace the retiring Brennan continues, with a focus on communication skills.